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MID-YEAR REPORT 1997
TRI-CONTINENTAL CORPORATION
[LOGO]
AN INVESTMENT YOU CAN LIVE WITH
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<PAGE>
TRI-CONTINENTAL CORPORATION INVESTS PRIMARILY TO PRODUCE LONG-TERM GROWTH OF
BOTH CAPITAL AND INCOME, WHILE PROVIDING REASONABLE CURRENT INCOME.
TY is Tri-Continental Corporation's symbol for its Common Stock on the New York
Stock Exchange.
<PAGE>
TRI-CONTINENTAL CORPORATION
To the Stockholders: August 1, 1997
In the second quarter of 1997, Tri-Continental Corporation posted a total
return of 16.32% based on net asset value, which outpaced the 15.17% total
return of its peers, as measured by the Lipper Closed-End Growth and Income
Funds Average, and the total return of mutual funds (open-end funds) with
similar investment objectives, as measured by the Lipper Growth and Income Funds
Average. On a risk-adjusted basis, Tri-Continental's total return compared
favorably with the 17.46% total return of the Standard & Poor's 500 Composite
Stock Price Index (S&P 500). A risk-adjusted return reflects the historical
volatility of an investment, such as Tri-Continental, relative to the volatility
of the overall market. Tri-Continental's total return for the second quarter
based on market price was 14.32%. Additional information on Tri-Continental's
investment results appears on page 4.
The low-inflation and moderate economic growth environment continued in the
second quarter of 1997. Instead of increasing inflation, the growing economy
actually generated lower producer prices for six consecutive months. The Federal
Reserve Board's decision to leave the federal funds rate unchanged in May also
helped tame inflation fears and gave further support to the already strong
financial markets. Low unemployment and high consumer confidence levels
continued, while consumer spending was relatively restrained.
Overall, the low interest rate environment characterizing the second quarter
improved the results of the equity market and of the Corporation, particularly
the portfolio's significant weighting in finance and insurance securities. The
equity market advances were disproportionately affected by the strong
performance from the 25 largest, more liquid stocks whose valuations neared
record highs. In this narrow market, the Corporation's diversified portfolio,
which holds stocks within a wide range of capitalizations, lagged the S&P 500.
However, the rally in the equity market broadened in May to include a greater
number of the types of stocks in which the Corporation invests. This trend, if
it continues, bodes well for the Corporation's future results.
1
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TRI-CONTINENTAL CORPORATION
Tri-Continental Corporation's Annual Meeting took place Thursday, May 15,
1997, in Boston. At the meeting, six directors were elected, the selection of
Deloitte & Touche LLP as auditors was ratified, and an increase in the number of
authorized shares of Common Stock was approved. Stockholder proposals that would
have changed the investment process or structure of Tri-Continental Corporation,
including a proposal to convert Tri-Continental to an open-end fund, were
rejected by an overwhelming majority of the Stockholders. For the complete
results of the vote, please refer to page 27.
We thank you for your continued support of Tri-Continental Corporation, "an
investment you can live with," and look forward to serving your investment needs
in the many years to come.
By order of the Board of Directors,
/s/William C. Morris
- --------------------
William C. Morris
Chairman
/s/Brian T. Zino
-----------------
Brian T. Zino
President
2
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TRI-CONTINENTAL CORPORATION
[PHOTO]
SELIGMAN GROWTH AND INCOME TEAM: (FROM LEFT) RODNEY COLLINS, MARGARET DOYLE,
JONATHAN ROTH, ODETTE GALLI (CO-PORTFOLIO MANAGER), (SEATED) MELANIE RAVENELL
(ADMINISTRATIVE ASSISTANT), CHARLES C. SMITH, JR. (CO-PORTFOLIO MANAGER), AMY
FUJII
INTERVIEW WITH YOUR PORTFOLIO MANAGERS
What were Tri-Continental Corporation's investment results in the second
quarter of 1997?
"The Corporation's total return of 16.32% based on net asset value outpaced
the 15.17% total return of Tri-Continental's peers, as measured by the Lipper
Closed-End Growth and Income Funds Average. The Corporation's total return also
outpaced the 14.30% total return of the broad group of open-end competitors with
similar investment objectives, as measured by the Lipper Growth and Income Funds
Average. Further, with only 88% of the volatility (risk) of the Standard &
Poor's 500 Composite Stock Price Index (S&P 500), the Corporation's total return
compared favorably to the 17.46% total return of the S&P 500 on a risk-adjusted
basis. Tri-Continental's total return based on market price was 14.32% for the
second quarter of 1997."
Which economic factors affected the Corporation's investment results in the
second quarter?
"The Federal Reserve Board acted once in the six-month period, increasing
the federal funds rate by 25 basis points in March. The March action was due to
the first-quarter surge in economic growth, which led to fears of inflation and
noticeable volatility in the financial markets. The second quarter, however,
brought moderate economic growth and a continuation of the low inflation levels
that had persisted throughout the first six months of the year. As a result,
there was a decline in interest rates that helped strengthen equity prices and
the Corporation's portfolio."
Which market factors influenced the Corporation's investment results in the
quarter?
"Large-capitalization stocks continued their rapid appreciation in the
second quarter, as witnessed by the successive record highs of benchmarks such
as the S&P 500 and the Dow Jones Industrial Average. As in the first quarter,
the 25 largest stocks in the S&P 500 were responsible for the majority of the
index's gains, and these stocks approached 10-year highs in their valuations.
However, in May and June, the market broadened to include a greater portion of
small- and mid-capitalization stocks in the advances. We believe that investors
are beginning to look for prices that are more closely tied to earnings."
What was your investment strategy?
"We maintained our strategy of searching for high-quality,
large-capitalization companies with reasonable yields and attractive valuations
relative to earnings. As it became increasingly difficult to
3
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TRI-CONTINENTAL CORPORATION
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INVESTMENT RESULTS PER COMMON SHARE
TOTAL RETURNS*
For Periods Ended June 30, 1997
<TABLE>
<CAPTION>
Average Annual
-------------------------------
Three Six One Five 10
Months Months Year Years Years
------- ------- ---- ----- -----
<S> <C> <C> <C> <C> <C>
Market Price 14.32% 16.83% 29.42% 13.23% 10.89%
Net Asset Value 16.32 18.44 29.25 17.15 12.98
S&P 500** 17.46 20.61 34.70 19.78 14.64
Lipper Closed-End
Growth & Income
Funds Average** 15.17 16.42 28.37 16.84 12.21
PRICE PER SHARE
June 30, 1997 March 31, 1997 December 31, 1996
------------ ------------- ----------------
<S> <C> <C> <C>
Market Price $27.0625 $24.50 $24.125
Net Asset Value 33.30 29.63 29.28
DIVIDEND AND CAPITAL GAIN INFORMATION
For the Six Months Ended June 30, 1997
Capital Gain
---------------------------------
Dividends Paid+ Realized Unrealized
-------------- -------- ---------
<S> <C> <C> <C>
$0.31 $1.26@ $10.37++
--------------------------------------
</TABLE>
* These rates of return reflect changes in market price or net asset value, as
applicable, and assume that all distributions within the period are taken in
additional shares. he rates of return will vary and the principal value of an
investment will fluctuate. Shares, if sold, may be worth more or less than
their original cost. Past performance is not indicative of future investment
results.
** The S&P 500 and the Lipper Closed-End Growth & Income Funds Average are
unmanaged benchmarks that assume investment of dividends.The S&P 500 does not
reflect fees and sales charges, and the Lipper Closed-End Growth & Income
Funds Average does not reflect sales charges. Investors cannot invest
directly in an index or an average.
+ Preferred Stockholders were paid dividends totaling $1.25 per share.
++ Represents the per share amount of net unrealized appreciation of portfolio
securities as of June 30, 1997.
@ Excludes the $0.807 of undistributed realized capital gains from 1996, which
were paid to Stockholders on July 1, 1997.
- --------------------------------------------------------------------------------
4
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TRI-CONTINENTAL CORPORATION
INTERVIEW WITH YOUR PORTFOLIO MANAGERS (continued)
find reasonable value in the highest capitalizations of the large-stock
universe, we re-focused our investments towards the mid-range capitalizations of
the large-stock universe. In the past, the stocks in the portfolio had average
capitalizations similar to those in the S&P 500. However, more attractive
valuations and higher earnings growth potential were found in companies with
market capitalizations that averaged $25 billion, compared to the stocks with
the largest capitalizations in the S&P 500, such as Coca-Cola Company ($168.6
billion).
"A portion of the portfolio was shifted into fixed-income, given the high
valuations found in the equity market and the attractive real rates of return
available in the bond market. These issues should help reduce overall
volatility. The portfolio's fixed-income weighting may be increased if equity
valuations continue to rise."
Which sectors in the portfolio improved the Corporation's investment results?
"Capital goods, finance, health care, and transportation were strong
contributors to the Corporation's investment results. The Corporation's
investments in the manufacturing and industrial equipment industry, specifically
in two mid-sized companies, Ingersoll-Rand Company and Parker-Hannifin
Corporation, contributed positively to Tri-Continental's results in the period.
Additionally, the Corporation's drug, health care, and transportation stocks
outperformed relative to their peers in the S&P 500. Finally, Kemet Corporation
and Vishay Intertechnology, Inc., two electronic component companies whose
earnings had been cyclically depressed in 1996, have recovered this year,
leading to significant capital appreciation in these stocks."
Which sectors impaired the Corporation's performance?
"Our decision to underweight investments in the consumer goods and services
and the energy industries negatively affected the Corporation's overall results.
As valuations in these sectors continued to be well above historic averages, we
remained cautious about investing additional assets in these areas."
What is the outlook?
"Overall, the strong pace of economic growth coupled with the low inflation
bodes well for the continued strength of the financial markets. We believe that
investing in the mid-range capitalizations of the large-stock universe, which
have more reasonable valuations, will allow Tri-Continental's portfolio to offer
competitive returns in the future. We also believe that when investors review
valuations found in the highest capitalization stocks, as they did in May and
June, they will re-focus their attention to those companies with more attractive
valuations and higher earnings growth potential. Tri-Continental's portfolio is
positioned to take advantage of such a potential broadening of the market and
shift in investor preference."
5
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TRI-CONTINENTAL CORPORATION
HIGHLIGHTS OF THE FIRST HALF
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS: 1997 1996
--------------- ---------------
<S> <C> <C>
Total assets ................................................... $ 3,366,010,205 $ 2,875,674,116
Amounts owed.................................................... 107,768,471 3,010,792
--------------- ---------------
NET INVESTMENT ASSETS .......................................... $ 3,258,241,734 $ 2,872,663,324
Preferred Stock, at par value .................................. 37,637,000 37,637,000
--------------- ---------------
Net assets for Common Stock .................................... $ 3,220,604,734 $ 2,835,026,324
=============== ===============
Common shares outstanding ...................................... 96,712,704 96,836,874
NET ASSETS BEHIND EACH
COMMON SHARE ................................................. $33.30 $29.28
SIX MONTHS ENDED JUNE 30,
-------------------------------------
TAXABLE GAIN: 1997 1996
-------------- --------------
Net capital gain realized ...................................... $ 122,289,688 $ 160,787,050
Per Common share ............................................... $1.26 $1.80
Unrealized capital gain, end of period ......................... $1,002,829,508 $ 560,024,043
Per Common share, end of period ................................ $10.37 $6.27
DISTRIBUTION OF GAIN, PAYABLE/PAID JULY 1:
Per Common share ............................................... $.807 $.572
INCOME:
Total income earned ............................................ $ 37,982,269 $ 40,547,535
Expenses ....................................................... 9,321,340 8,106,957
Preferred Stock dividends ...................................... 940,925 940,925
-------------- --------------
Income for Common Stock ........................................ $ 27,720,004 $ 31,499,653
============== ==============
Expenses to average net assets ................................. 0.62%* 0.62%
DIVIDENDS PER COMMON SHARE ..................................... $.31 $.34
With December 1996 gain distribution taken in shares ........... $.34 --
</TABLE>
- ----------
* Annualized.
6
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TRI-CONTINENTAL CORPORATION
DIVERSIFICATION OF ASSETS
The diversification of portfolio holdings by industry on June 30, 1997, was as
follows. Individual securities owned are listed on pages 9 to 17.
<TABLE>
<CAPTION>
Percent of
Net Investment
Assets
------------------
June 30, Dec. 31,
Issues Cost Value 1997 1996
--------- ------------- -------------- ------- --------
<S> <C> <C> <C> <C> <C>
SHORT-TERM HOLDINGS AND
OTHER ASSETS LESS LIABILITIES 1 $ (20,332,119) $ (20,332,119) (0.6)%+ 9.4%
US GOVERNMENT SECURITIES 3 124,085,156 123,714,125 3.8 --
CORPORATE BONDS 2 20,006,300 20,075,940 0.6 --
TRI-CONTINENTAL
FINANCIAL DIVISION 3 16,654,000 17,532,833 0.5 0.5
--- ------------- ------------- ------ ------
9 $ 140,413,337 $ 140,990,779 4.3% 9.9%
--- ------------- ------------- ------ ------
COMMON STOCKS AND
CONVERTIBLE ISSUES:
Aerospace 4 $ 71,428,297 $ 93,550,000 2.9% 2.8%
Automotive and related 5 87,741,458 114,842,626 3.5 4.0
Basic materials 2 24,242,944 36,450,000 1.1 2.0
Building and construction 1 10,822,199 18,525,000 0.6 0.6
Chemicals 5 71,562,338 84,160,985 2.6 2.6
Communications 10 115,129,697 146,365,679 4.5 4.1
Computer and business services 8 100,846,989 156,778,125 4.8 5.4
Consumer goods and services 14 206,062,220 316,709,145 9.7 9.9
Diversified 5 102,900,964 153,425,000 4.7 3.9
Drugs and health care 10 121,521,159 246,486,909 7.6 6.2
Electric and gas utilities 11 84,339,016 97,087,714 3.0 4.1
Electronics 10 161,012,133 220,477,813 6.8 5.8
Energy 9 119,878,142 192,621,608 5.9 6.4
Entertainment and leisure 4 24,792,632 35,633,667 1.1 1.1
Environmental management 1 18,502,310 19,950,000 0.6 0.5
Finance and insurance 24 287,959,897 504,988,943 15.5 12.3
Manufacturing and
industrial equipment 11 156,475,686 238,541,731 7.3 7.2
Paper and forest products 5 102,648,490 120,831,337 3.7 3.1
Publishing 3 24,137,617 45,035,767 1.4 1.3
Real estate investment trusts 3 25,031,183 32,650,000 1.0 1.1
Retail trade 7 110,353,383 143,448,785 4.4 3.8
Steel 2 44,663,482 49,619,375 1.5 0.4
Transportation 4 42,946,653 49,070,746 1.5 1.5
--- -------------- -------------- ----- ------
158 $2,114,998,889 $3,117,250,955 95.7% 90.1%
--- -------------- -------------- ------ ------
NET INVESTMENT ASSETS 167 $2,255,412,226 $3,258,241,734 100.0% 100.0%
=== ============== ============== ====== ======
</TABLE>
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+Includes a liability of 2.9% of net investment assets from dividend and capital
gain distributions payable July 1, 1997.
7
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TRI-CONTINENTAL CORPORATION
LARGEST PORTFOLIO CHANGES
APRIL 1 TO JUNE 30, 1997
SHARES OR PRIN. AMT.
------------------------
HOLDINGS
ADDITIONS INCREASE 6/30/97
---------- ----------
COMMON STOCKS
Ahmanson (H.F.) &
Company 800,000 shs. 800,000 shs.
AK Steel Holdings
Corporation 635,000 635,000
Corning, Inc. 500,000 850,000
SBC Communications,
Inc. 425,000 425,000
TIG Holdings, Inc. 500,000 500,000
United Technologies
Corporation 200,000 500,000
Westinghouse Electric
Corporation 1,200,000 1,200,000
US GOVERNMENT SECURITIES
US Treasury Notes,
5 7/8%, 2/15/2004 $45,000,000 $45,000,000
US Treasury Notes,
6 1/4%, 4/30/2001 35,000,000 35,000,000
US Treasury Notes,
6 3/8%, 5/15/2000 45,000,000 45,000,000
SHARES
------------------------
HOLDINGS
REDUCTIONS INCREASE 6/30/97
---------- ----------
COMMON STOCKS
ALLTEL Corporation 500,000 --
Dow Chemical
Company 250,000 --
Edison International 1,000,000 --
Ford Motor Company 800,000 --
Great Western
Financial Corporation 400,000 --
Household
International, Inc. 200,000 --
International Paper
Company 600,000 --
Microsoft Corporation 100,000 200,000
CONVERTIBLE PREFERRED STOCKS
AK Steel Holdings
Corporation, 7% 700,000 --
Corning, Inc.
(Delaware), 6% 250,000 --
Largest portfolio changes are based on cost of purchases and proceeds from sales
of securities.
10 LARGEST EQUITY HOLDINGS
JUNE 30, 1997
Value
-----------
Corning, Inc. $47,281,250
American International Group, Inc. 44,812,500
Bank of New York Company, Inc. 43,500,000
AMP Inc. 41,750,000
United Technologies Corporation 41,500,000
PepsiCo,Inc. 41,318,750
General Electric Company 39,225,000
Colgate-Palmolive Company 39,150,000
American Home Products Corporation 38,250,000
Parker-HannifinCorporation 37,929,688
8
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<TABLE>
<CAPTION>
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
SHARES VALUE
---------------- ----------------
<S> <C> <C>
COMMON STOCKS - 94.5%
AEROSPACE - 2.9%
GENERAL DYNAMICS CORPORATION 200,000 $ 15,000,000
Diversified defense contractor
GENERAL MOTORS CORPORATION CLASS "H" 200,000 11,550,000
Diversified aerospace manufacturer-- missiles, satellites,
and communications systems
RAYTHEON COMPANY 500,000 25,500,000
Producer of defense and commercial electronics
UNITED TECHNOLOGIES CORPORATION 500,000 41,500,000
Manufacturer of elevators, jet engines, flight systems, and
automotive parts ------------
$ 93,550,000
------------
AUTOMOTIVE AND RELATED - 3.5%
BORG-WARNER AUTOMOTIVE, INC. 402,300 $ 21,749,344
Manufacturer of automobile powertrain components
ECHLIN INC. 600,000 21,600,000
Manufacturer of brakes and automobile replacement parts
HARLEY-DAVIDSON INC. 600,000 28,762,500
Manufacturer of motorcycles
MAGNA INTERNATIONAL INC. CLASS "A" 455,000 27,385,312
Manufacturer of automobile parts
VOLKSWAGEN AG (ADRS)* 100,000 15,345,470
German manufacturer of automobiles ------------
$114,842,626
------------
BASIC MATERIALS - 1.1%
ALUMINUM COMPANY OF AMERICA 200,000 $ 15,075,000
US aluminum producer
REYNOLDS METALS COMPANY 300,000 21,375,000
Manufacturer of finished aluminum products ------------
$ 36,450,000
------------
BUILDING AND CONSTRUCTION - 0.6%
SHERWIN-WILLIAMS CORPORATION 600,000 $ 18,525,000
Manufacturer of paints and related products ------------
CHEMICALS - 2.6%
BAYER AG 400,000 $ 15,420,360
German producer of specialty chemicals, pharmaceuticals, and plastics
DUPONT (E.I.) DE NEMOURS AND COMPANY 200,000 12,575,000
Producer of chemicals
HERCULES, INC. 500,000 23,937,500
Manufacturer of specialty chemicals
MORTON INTERNATIONAL, INC. 550,000 16,603,125
Manufacturer and marketer of adhesives, coatings, salt,
and specialty products
OLIN CORPORATION 400,000 15,625,000
Producer of chemicals, defense products, ammunition, and metals ------------
$ 84,160,985
------------
</TABLE>
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See footnotes on page 17.
9
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TRI CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 1997
SHARES VALUE
---------------- -------------
<S> <C> <C>
COMMUNICATIONS - 4.5%
ALCATEL ALSTHOM COMPAGNIE GENERALE D'ELECTRICITE 65,000 $ 8,142,009
French developer of equipment and systems for
public telecommunications
BELL ATLANTIC CORPORATION 152,200 11,548,175
Telephone services in the Atlantic region
GTE CORPORATION 600,000 26,325,000
Manufacturer of telephone systems and equipment
QUALCOMM, Inc.* 325,000 16,544,531
Developer, manufacturer, and marketer of communications
systems and products
SBC COMMUNICATIONS, INC. 425,000 26,296,875
Telephone services in the Southwest
TELE DANMARK (ADSS) 415,000 10,841,875
Provider of domestic and international telephone services
in Denmark
TELEBRAS (ADRS) 23,500 3,566,125
Provider of telecommunications services in Brazil
TELECOM ITALIA-DI RISP 2,526,000 5,008,833
Provider of the whole spectrum of
telecommunications services throughout Italy
TELECOM ITALIA MOBILE-DI RISP 2,526,000 4,525,068
Provider of the whole spectrum of mobile
telecommunications services throughout Italy
WORLDCOM INC.* 1,050,000 33,567,188
Diversified telecommunications company
------------
$146,365,679
------------
COMPUTER AND BUSINESS SERVICES - 4.8%
AUTOMATIC DATA PROCESSING, INC. 350,000 $ 16,450,000
Provider of data processing services
COMPAQ COMPUTER CORPORATION* 250,000 24,812,500
Global PCmanufacturer
COMPUTER ASSOCIATES INTERNATIONAL,INC. 400,000 22,275,000
Software utilities and databases
FIRST DATA CORPORATION 400,000 17,575,000
Provider of data processing services
HEWLETT-PACKARD COMPANY 300,000 16,800,000
Computers and peripherals
IKON OFFICE SOLUTIONS INC. 600,000 14,962,500
Provider of automated office equipment
MICROSOFT CORPORATION* 200,000 25,293,750
Developer of computer software
SUN MICROSYSTEMS, INC.* 500,000 18,609,375
Marketer of networked workstations
------------
$156,778,125
------------
CONSUMER GOODS AND SERVICES - 9.7%
ADIDAS AG 165,960 $ 18,565,356
German manufacturer of sporting equipment and footwear
ALLIED DOMECQ PLC 870,000 6,244,862
International food, drink, and hospitality group in the UK
B.A.T. Industries plc 1,440,000 12,875,490
Provider of financial services and producer of tobacco products
in the UK
COLGATE-PALMOLIVE COMPANY 600,000 39,150,000
Manufacturer and marketer of household and personal care products
</TABLE>
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See footnotes on page 17.
10
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 1997
SHARES VALUE
---------------- -------------
<S> <C> <C>
CONSUMER GOODS AND SERVICES (continued)
CPC INTERNATIONAL INC. 250,000 $ 23,078,125
International food processor
EASTMAN KODAK COMPANY 300,000 23,025,000
Manufacturer and marketer of film and other consumer products
GENERAL MILLS, INC. 200,000 13,025,000
Manufacturer and marketer of consumer foods
INTERNATIONAL FLAVORS & FRAGRANCES INC. 700,000 35,350,000
Developer and manufacturer of flavor and fragrance products
LIZ CLAIBORNE, INC. 400,000 18,650,000
Designer and distributor of apparel
MCDONALD'S CORPORATION 325,000 15,701,562
Franchiser and operator of fast-food restaurants
PEPSICO, INC. 1,100,000 41,318,750
Manufacturer and marketer of soft drinks and consumer products
PROCTER & GAMBLE COMPANY 200,000 28,250,000
Manufacturer and distributor of household and personal care products
RJR NABISCO HOLDINGS CORPORATION 500,000 16,500,000
Manufacturer of processed foods and consumer products
SARA LEE CORPORATION 600,000 24,975,000
Manufacturer of processed foods and consumer products ------------
$316,709,145
------------
DIVERSIFIED - 4.7%
ALLIEDSIGNAL INC. 300,000 $ 25,200,000
Producer of aerospace and automotive materials
CORNING, INC. 850,000 47,281,250
Manufacturer of specialty glass products
MINNESOTA MINING & MANUFACTURING COMPANY 300,000 30,600,000
Manufacturer of consumer and industrial goods and services
TENNECO, INC. 500,000 22,593,750
Manufacturer of automobile parts and packaging
WESTINGHOUSE ELECTRIC CORPORATION 1,200,000 27,750,000
Manufacturer of electric equipment ------------
$153,425,000
------------
DRUGS AND HEALTH CARE - 7.6%
ABBOTT LABORATORIES 300,000 $ 20,025,000
Developer and manufacturer of diversified health care products
AMERICAN HOME PRODUCTS CORPORATION 500,000 38,250,000
Developer and manufacturer of pharmaceuticals, food, and housewares
BAXTER INTERNATIONAL INC. 500,000 26,125,000
Manufacturer and distributor of hospital and laboratory products
BRISTOL-MYERS SQUIBB COMPANY 350,000 28,350,000
Developer and manufacturer of health and personal care products
GUIDANT CORPORATION 275,000 23,375,000
Designer and manufacturer of cardiac rhythm management and
coronary artery disease intervention equipment
MEDTRONIC, INC. 225,000 18,225,000
Manufacturer of pacemakers and related cardiovascular products
MERCK & CO., INC. 300,000 31,050,000
Manufacturer of pharmaceuticals
NOVARTIS AG* 6,800 10,874,409
Swiss manufacturer of pharmaceuticals
</TABLE>
- -------------------
See footnotes on page 17.
11
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TRI-CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 1997
SHARES VALUE
---------------- -------------
<S> <C> <C>
DRUGS AND HEALTH CARE (continued)
SCHERING-PLOUGH CORPORATION 400,000 $ 19,150,000
Manufacturer of pharmaceuticals and health and personal care products
WARNER-LAMBERT COMPANY 250,000 31,062,500
Manufacturer of pharmaceuticals, toiletries, and food products ------------
$246,486,909
------------
ELECTRIC AND GAS UTILITIES - 3.0%
BG PLC (ADRS) 115,000 $ 4,211,875
Gas supplier in the UK
CENTRICA PLC* 1,150,000 1,401,291
Producer and distributor of natural gas products and services
COMPANHIA ENERGETICA DE MINAS GERAIS (ADRS) 68,200 3,433,597
Electric utility in Brazil
DOMINION RESOURCES, INC. 500,000 18,312,500
Provider of electric services inthe mid-Atlantic region
ELECTRICIDADE DE PORTUGAL, S.A. (ADRS) 129,600 4,665,600
Generator and distributor of electricity in Portugal
EMPRESA NACIONAL DE ELECTRICIDAD (ADRS) 132,000 11,228,250
Provider of electric energy in Spain
HONG KONG & CHINA GAS COMPANY LTD. 5,760,000 11,524,461
Producer, distributor, and marketer of natural gas to industrial and
residential customers
HONG KONG & CHINA GAS COMPANY LTD. (WARRANTS)* 400,000 428,553
Producer, distributor, and marketer of natural gas to industrial and
residential customers
HUANENG POWER INTERNATIONAL, INC. (ADRS)* 270,000 6,885,000
Power company in China
PACIFICORP 1,000,000 22,000,000
Provider of electric services in the western US
VEBA AG 230,000 12,996,587
Provider of electric energy inGermany ------------
$ 97,087,714
------------
ELECTRONICS - 6.8%
AMP Inc. 1,000,000 $ 41,750,000
Manufacturer of electronic connectors and systems
ARROW ELECTRONICS, INC. 400,000 21,250,000
Distributor of electronic components
INTEL CORPORATION 150,000 21,239,063
Manufacturer of semiconductors/memory circuits
Kemet Corporation* 1,100,000 27,431,250
Manufacturer and supplier of capacitors
Motorola Inc. 400,000 30,400,000
Producer of semiconductors and communications equipment
Novellus Systems, Inc.* 200,000 17,250,000
Manufacturer of chemical vapor deposition equipment
Philips Electronics N.V. 175,000 12,578,125
Worldwide manufacturer of consumer electronics and components
based in the Netherlands
Synopsys, Inc.* 250,000 9,226,563
Developer of integrated circuit design software
Thomas & Betts Corporation 300,000 15,768,750
Manufacturer of electronic connectors and components
Vishay Intertechnology, Inc.* 815,000 23,584,062
Developer and manufacturer of electronic resistive systems ------------
$220,477,813
------------
</TABLE>
- -------------------
See footnotes on page 17.
12
<PAGE>
TRI-CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 1997
SHARES VALUE
---------------- -------------
<S> <C> <C>
ENERGY - 5.9%
AMOCO CORPORATION 275,000 $ 23,907,813
Producer of oil and gas
ATLANTIC RICHFIELD COMPANY 250,000 17,625,000
Producer of oil and West Coast marketer
BAKER HUGHES INCORPORATED 300,000 11,606,250
Provider of products and services to explore for,
extract, recover, and process oil and gas
ENRON CORPORATION 600,000 24,487,500
Explorer, transporter, and marketer of energy
EXXON CORPORATION 600,000 36,900,000
Explorer and producer of natural gas, oil, and petroleum products
SCHLUMBERGER LTD. 100,000 12,500,000
Worldwide provider of energy services
TEXACO INC. 250,000 27,187,500
Explorer, producer, transporter, refiner, and marketer of
natural gas, oil, and petroleum products
TOTAL S.A. CLASS "B" 76,983 7,782,545
International oil enterprise in France
THE WILLIAMS COMPANIES, INC. 700,000 30,625,000
Transporter and producer of natural gas ------------
$192,621,608
------------
ENTERTAINMENT AND LEISURE - 1.1%
DISNEY (WALT) COMPANY 250,000 $ 20,062,500
Film entertainment, amusement parks, and
other forms of leisure-related activities
NEWS CORP. LTD. (ADRS) 260,000 5,005,000
Provider of worldwide media and television services
NEWS CORP. LTD. (ADRS--VOTING PREFERENCE SHARES) 130,000 2,031,250
Provider of worldwide media and television services
TELEVISION BROADCAST LTD. 1,900,000 8,534,917
TV broadcasting; program production and licensing; advertising ------------
$ 35,633,667
------------
ENVIRONMENTAL MANAGEMENT - 0.6%
Browning-Ferris Industries, Inc. 600,000 $ 19,950,000
Provider of solid and liquid waste management services ------------
FINANCE AND INSURANCE - 15.4%
ABN-AMRO Holdings N.V. 510,868 $ 9,530,439
Worldwide banking operator based in the Netherlands
ACE LIMITED 300,000 22,162,500
Provider of liability insurance
AHMANSON (H.F.) &COMPANY 800,000 34,400,000
Provider of savings and loan services throughout the US
AMERICAN INTERNATIONAL GROUP, INC. 300,000 44,812,500
International insurance holding company
AXA-UAP 166,509 10,357,751
French provider of financial services and insurance
BANKAMERICA CORPORATION 500,000 32,281,250
Commercial banker in California and the Western states
BANK OF IRELAND 250,000 2,751,013
Financial services provider in the UK
</TABLE>
- -------------------
See footnotes on page 17.
13
<PAGE>
Tri-Continental Corporation
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 1997
SHARES VALUE
---------------- -------------
<S> <C> <C>
FINANCE AND INSURANCE (continued)
BANK OF NEW YORK COMPANY, INC. 1,000,000 $ 43,500,000
Commercial banker
CIGNA CORPORATION 150,000 26,625,000
Multi-line insurance holding company
CITICORP 200,000 24,112,500
Global commercial banker
FEDERAL NATIONAL MORTGAGE ASSOCIATION 600,000 26,175,000
Mortgage financer
GENERAL RE CORPORATION 200,000 36,400,000
Property casualty re-insurer in the US
GRUPO FINANCIERO BANAMEX ACCIVAL, S.A. CLASS "B" 818,400 2,147,435
Financial company involved in banking and stockbroking in Mexico
THE HARTFORD FINANCIAL SERVICES GROUP, INC. 300,000 24,825,000
Provider of diversified insurance products
HSBC Holdings plc 350,000 10,526,655
UK provider of banking and financial services
ING GROEP N.V. 437,624 20,187,049
Provider of banking and insurance services in the Netherlands
IRISH LIFE PLC 700,000 3,563,217
UK provider of insurance and related products
MELLON BANK CORPORATION 800,000 36,100,000
Financial services provider
ST. PAUL COMPANIES 400,000 30,500,000
Property and casualty insurer
TIG HOLDINGS, INC. 500,000 15,625,000
Insurance provider
TRAVELERS INCORPORATED 500,000 31,531,250
Provider of broad-based financial services
UNIAO DE BANCOS BRASILEIROS (GDRS) 15,500 575,438
Commercial bank inBrazil
ZURICH VERSICHERUNGSGESELLSCHAFT 30,000 11,942,446
Provider of insurance services ------------
$500,631,443
------------
MANUFACTURING AND
INDUSTRIAL EQUIPMENT - 7.2%
BTR PLC 1,300,000 $ 4,444,040
Global manufacturer of industrial goods in the UK
EMERSON ELECTRIC COMPANY 500,000 27,531,250
Manufacturer of electric motors, hand-held tools, and miscellaneous
electrical equipment
GATX CORPORATION 350,000 20,212,500
Railcar leasing; equipment financing
GENERAL ELECTRIC COMPANY 600,000 39,225,000
Supplier of electrical equipment and other industrial
and consumer products
GENERAL SIGNAL CORPORATION 600,000 26,175,000
Producer of capital goods
ILLINOIS TOOL WORKS, INC. 700,000 34,956,250
Manufacturer of fasteners, tools, and plastic items
INGERSOLL-RAND COMPANY 500,000 30,875,000
Manufacturer of machinery, equipment, bearings, and tools
MANNESMANN AG 22,500 10,055,073
German manufacturer of plant and machinery equipment;
automotive technology
</TABLE>
- -------------------
See footnotes on page 17.
14
<PAGE>
TRI-CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 1997
SHARES VALUE
---------------- -------------
<S> <C> <C>
MANUFACTURING AND
INDUSTRIAL EQUIPMENT (continued)
PACIFIC DUNLOP LTD. 1,500,000 $ 4,437,930
Diversified Australian manufacturer
PARKER-HANNIFIN CORPORATION 625,000 37,929,688
Manufacturer of motion-control products ------------
$235,841,731
------------
PAPER AND FOREST PRODUCTS - 3.7%
JAMES RIVER CORPORATION OF VIRGINIA 800,000 $ 29,600,000
Producer of consumer paper products
KIMBERLY-CLARK CORPORATION 400,000 19,900,000
Manufacturer of consumer paper products; newsprint
THE MEAD CORPORATION 600,000 37,350,000
Manufacturer of paper, lumber, and wood products
STORA KOPPARBERGS CLASS "B" 550,000 8,981,337
Swedish manufacturer of forestry products
UNION CAMP CORPORATION 500,000 25,000,000
Producer of paper products, building materials, and chemicals ------------
$120,831,337
------------
PUBLISHING - 1.4%
ELSEVIER N.V. 650,000 $ 10,867,017
Dutch printer and publisher of professional trade
journals and magazines worldwide
GANNET COMPANY, INC. 200,000 19,750,000
Newspapers, radio, and TV broadcasting
TRIBUNE COMPANY 300,000 14,418,750
Book and newspaper publisher, newsprint operations ------------
$ 45,035,767
------------
REAL ESTATE INVESTMENT TRUSTS - 1.0%
SECURITY CAPITAL INDUSTRIAL TRUST 400,000 $ 8,600,000
Operator of distribution facilities
SECURITY CAPITAL PACIFIC TRUST 400,000 9,150,000
Investor in multi-family residential properties
SECURITY CAPITAL USREALTY TRUST 1,000,000 14,900,000
Diversified investor in real estate companies
------------
$ 32,650,000
------------
RETAIL TRADE - 3.6%
MAY DEPARTMENT STORES COMPANY 400,000 $ 18,900,000
Department store operator
OFFICEMAX, INC. 1,025,000 14,798,437
Office products superstore
THE PEP BOYS - MANNY, MOE AND JACK 800,000 27,250,000
Retailer of automotive parts and accessories
TESCO PLC 1,478,000 9,084,723
Food retailer in the UK
WAL-MART STORES, INC. 650,000 21,978,125
Discount retailer
WOOLWORTH CORPORATION* 1,000,000 24,000,000
Specialty retailer ------------
$116,011,285
------------
</TABLE>
- -------------------
See footnotes on page 17.
15
<PAGE>
TRI-CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (continued) SHARES OR JUNE 30, 1997
PRIN. AMT. VALUE
---------------- --------------
<S> <C> <C>
STEEL - 1.5%
AK STEEL HOLDINGS CORPORATION 635,000 shs. $ 28,019,375
Integrated steel producer
ALLEGHENY TELEDYNE INC. 800,000 21,600,000
Manufacturer of specialty metals, aviation, and --------------
electronics products $ 49,619,375
--------------
TRANSPORTATION - 1.3%
BURLINGTON NORTHERN SANTA FE 250,000 $ 22,468,750
Operator of freight railroad systems
JURONG SHIPYARD LTD. 425,000 1,843,044
Ship repair company in Singapore
NORFOLK SOUTHERN CORPORATION 200,000 20,150,000
Railroad holding company --------------
$ 44,461,794
--------------
TOTAL COMMON STOCKS
(Cost: $2,077,392,050) $3,078,147,003
--------------
US GOVERNMENT SECURITIES - 3.8%
US TREASURY NOTES, 5 7/8%, 2/15/2004 $45,000,000 $ 43,607,835
US TREASURY NOTES, 6 1/4%, 4/30/2001 35,000,000 34,923,455
US TREASURY NOTES, 6 3/8%, 5/15/2000 45,000,000 45,182,835
--------------
TOTAL US GOVERNMENT SECURITIES
(COST: $124,085,156) $ 123,714,125
--------------
CORPORATE BONDS - 0.6%
FORD MOTOR CREDIT CORP., 6 1/2%, 2/28/2002 10,000,000 $ 9,897,990
TCI COMMUNICATIONS INC., 8%, 8/1/2005 10,000,000 10,177,950
--------------
TOTAL CORPORATE BONDS
(COST: $20,006,300) $ 20,075,940
--------------
CONVERTIBLE ISSUES - 1.2%
CONVERTIBLE DEBENTURES - 0.4%
FINANCE AND INSURANCE - 0.1%
LIBLIFE INTERNATIONAL (UK), 6 1/2%, 9/30/2004 3,500,000 $ 4,357,500
--------------
MANUFACTURING AND
INDUSTRIAL EQUIPMENT - 0.1%
TECO ELECTRICAL AND MACHINERY (TAIWAN), 2 3/4%, 4/15/2004 3,000,000 $ 2,700,000
--------------
TRANSPORTATION - 0.2%
NIPPON YUSEN (JAPAN), 2%, 9/29/2000 505,000,000** $ 4,608,952
--------------
</TABLE>
- -------------------
See footnotes on page 17.
16
<PAGE>
TRI-CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 1997
SHARES VALUE
---------------- -------------
<S> <C> <C>
TOTAL CONVERTIBLE DEBENTURES
(COST: $12,340,296) $ 11,666,452
--------------
CONVERTIBLE PREFERRED STOCKS - 0.8%
(COST: $25,266,543)
RETAIL TRADE - 0.8%
KMART FINANCING, 7 3/4% 500,000 $ 27,437,500
--------------
TOTAL CONVERTIBLE ISSUES
(Cost: $37,606,839) $ 39,103,952
--------------
TRI-CONTINENTAL FINANCIAL DIVISION++ - 0.5%
(Cost: $16,654,000) $ 17,532,833
--------------
SHORT-TERM HOLDINGS - 1.9%
(Cost: $60,600,000) $ 60,600,000
--------------
TOTAL INVESTMENTS - 102.5%
(Cost: $2,336,344,345) $3,339,173,853
OTHER ASSETS LESS LIABILITIES - (2.5)% (80,932,119)
--------------
NET INVESTMENT ASSETS - 100.0% $3,258,241,734
==============
</TABLE>
- ---------------------
* Non-income producing security.
** Principal amount reported in Japanese Yen.
++ Restricted securities.
Descriptions of companies have not been audited by Deloitte and Touche LLP.
See Notes to Financial Statements.
17
<PAGE>
TRI-CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES June 30, 1997
ASSETS:
Investments at value:
<S> <C> <C>
Common stocks (cost--$2,077,392,050) ........................... $3,078,147,003
US Government securities (cost--$124,085,156) .................. 123,714,125
Convertible issues (cost--$37,606,839) ......................... 39,103,952
Corporate bonds (cost--$20,006,300) ............................ 20,075,940
Tri-Continental Financial Division
(cost--$16,654,000) .......................................... 17,532,833
Short-term holdings (cost--$60,600,000) ........................ 60,600,000 $3,339,173,853
--------------
Cash ............................................................ 9,149,106
Receivable for dividends and interest ........................... 8,520,203
Receivable for securities sold .................................. 8,487,716
Investment in, and expenses prepaid to, stockholder
service agent ................................................. 448,051
Other ........................................................... 231,276
--------------
TOTAL ASSETS .................................................... $3,366,010,205
--------------
Liabilities:
Distributions payable ........................................... $ 93,050,696
Payable for securities purchased ................................ 12,351,453
Accrued expenses, taxes, and other .............................. 2,366,322
--------------
TOTAL LIABILITIES ............................................... $ 107,768,471
--------------
Net Investment Assets ........................................... $3,258,241,734
Preferred Stock, at $50 par value ............................... 37,637,000
--------------
Net Assets for Common Stock ..................................... $3,220,604,734
==============
Net Assets per Share of Common Stock
(market value--$27.0625) ...................................... $33.30
======
STATEMENT OF CAPITAL STOCK AND SURPLUS June 30, 1997
CAPITAL STOCK:
$2.50 Cumulative Preferred Stock, $50 par value,
asset coverage per share--$4,328.51
Shares authorized--1,000,000; issued
and outstanding--752,740 ...................................... $ 37,637,000
Common Stock, $.50 par value:
Shares authorized--129,000,000; issued
and outstanding--96,712,704 ................................... 48,356,352
SURPLUS:
Capital surplus ................................................ 2,049,023,409
Dividends in excess of net investment income ................... (904,736)
Undistributed net realized gain ................................ 121,311,729
Net unrealized appreciation of investments ..................... 1,013,042,462
Net unrealized depreciation on translation of assets
and liabilities denominated in foreign currencies* ............ (10,224,482)
--------------
$3,258,241,734
==============
</TABLE>
- ------------
* Includes net unrealized depreciation on translation of investments
denominated in foreign currencies of $10,212,954.
See Notes to Financial Statements.
18
<PAGE>
TRI-CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME:
Dividends ...................................................... $ 31,569,788
Interest ....................................................... 6,160,871
------------
TOTAL INVESTMENT INCOME (net of foreign taxes
withheld of $511,806) ......................................... $ 37,730,659
EXPENSES:
Management fee ................................................. $ 6,129,682
Stockholder account and registrar services ..................... 1,671,419
Stockholder reports and communications ......................... 514,802
Custody and related services ................................... 445,920
Stockholders' meeting .......................................... 172,636
Auditing and legal fees ........................................ 170,659
Directors' fees and expenses ................................... 94,029
Registration ................................................... 54,873
Miscellaneous .................................................. 67,320
------------
TOTAL EXPENSES .................................................. 9,321,340
------------
NET INVESTMENT INCOME ........................................... $ 28,409,319*
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain on investments ............................... $122,963,220
Net realized loss from foreign
currency transactions ......................................... (421,922)
Net change in unrealized appreciation
of investments ................................................ 358,882,847
Net change in unrealized appreciation
on translation of assets and liabilities
denominated in foreign currencies ............................. (12,059,825)
------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS .......................................... 469,364,320
------------
INCREASE IN NET INVESTMENT ASSETS
FROM OPERATIONS ................................................. $497,773,639
============
</TABLE>
- ------------
*Net investment income available for Common Stock is $27,720,004, which is net
of Preferred Stock dividends of $940,925, and includes a portion of the net
realized gain from foreign currency transactions of $251,610 which is taxable
as ordinary income.
See Notes to Financial Statements.
19
<PAGE>
TRI-CONTINENTAL CORPORATION
STATEMENTS IN CHANGES IN NET INVESTMENT ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 28,409,319 $ 61,661,375
Net realized gain on investments ................................ 122,963,220 273,265,510
Net realized loss from foreign currency transactions ............ (421,922) (122,163)
Net change in unrealized appreciation
of investments ................................................ 358,882,847 163,203,213
Net change in unrealized appreciation on
translation of assets and liabilities
denominated in foreign currencies ............................. (12,059,825) (1,863,034)
------------- --------------
INCREASE IN NET INVESTMENT
ASSETS FROM OPERATIONS ........................................ $ 497,773,639 $ 496,144,901
------------- --------------
DISTRIBUTIONS TO STOCKHOLDERS:
Net investment income:
Preferred Stock (per share: $1.25 and $2.50) .................. $ (940,925) $ (1,881,850)
Common Stock (per share: $.31 and $.66) ....................... (29,986,522) (59,457,756)
------------- --------------
$ (30,927,447) $ (61,339,606)
Net realized gain on investments:
Common Stock (per share: $.807 and $2.722) .................... (78,082,221) (246,856,282)
------------- --------------
DECREASE IN NET INVESTMENT ASSETS
FROM DISTRIBUTIONS ............................................ $ 109,009,668) $ (308,195,888)
------------- --------------
CAPITAL SHARE TRANSACTIONS:
Value of shares of Common Stock issued
at market price in gain distributions
(7,302,117 shares) ............................................ $ -- $ 177,343,090
Value of shares of Common Stock issued
for investment plans (869,474 and 2,026,442 shares) ........... 22,070,777 49,236,168
Cost of shares purchased for investment plans
(994,291 and 2,017,316 shares) ................................ (25,257,327) (48,673,006)
Net proceeds from issuance of shares of
Common Stock upon exercise of
Warrants (647 and 13,447 shares) .............................. 989 22,301
------------- --------------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS
FROM CAPITAL SHARE TRANSACTIONS ............................... $ (3,185,561) $ 177,928,553
------------- --------------
INCREASE IN NET INVESTMENT ASSETS ............................... $ 385,578,410 $ 365,877,566
Net Investment Assets:
Beginning of period ............................................. 2,872,663,324 2,506,785,758
------------- --------------
END OF PERIOD (including dividends in excess of
net investment income and undistributed
net investment income of $(904,736) and
$1,361,782, respectively) ..................................... $3,258,241,734 $2,872,663,324
============== ==============
</TABLE>
- ------------
See Notes to Financial Statements.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Corporation:
a. SECURITY VALUATION -- Investments in stocks, bonds, limited partnership
interests, and short-term holdings maturing in more than 60 days are valued
at current market values or, in their absence, fair value determined in
accordance with procedures approved by the Board of Directors. Securities
traded on national exchanges are valued at last sales prices or, in their
absence and in the case of over-the-counter securities, at the mean of bid
and asked prices. Short-term holdings maturing in 60 days or less are valued
at amortized cost.
b. FOREIGN CURRENCY TRANSACTIONS -- The books and records of the Corporation
are maintained in US dollars. The market value of investment securities and
other assets and liabilities denominated in foreign currencies are
translated into US dollars at the closing daily rate of exchange as reported
by a pricing service. Purchases and sales of investment securities, income,
and expenses are translated into US dollars at the rate of exchange
prevailing on the respective dates of such transactions.
The Corporation separates that portion of the results of operations
resulting from changes in the foreign exchange rates from the fluctuations
arising from changes in the market prices of securities held in the
portfolio. Similarly, the Corporation separates the effect of changes in
foreign exchange rates from the fluctuations arising from changes in the
market prices of portfolio securities sold during the period.
c. FORWARD CURRENCY CONTACTS -- The Corporation may enter into forward currency
contracts in order to hedge its exposure to changes in foreign currency
exchange rates on its foreign portfolio holdings, or other amounts
receivable or payable in foreign currency. A forward contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Certain risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts. The contracts are valued daily at current exchange rates
and any unrealized gain or loss is included in net unrealized appreciation
or depreciation on translation of assets and liabilities denominated in
foreign currencies and forward currency contracts. The gain or loss, if any,
arising from the difference between the settlement value of the forward
contract and the closing of such contract is included in net realized gain
or loss from foreign currency transactions.
d. FEDERAL TAXES -- There is no provision for federal income tax. The
Corporation has elected to be taxed as a regulated investment company and
intends to distribute substantially all taxable net income and net gain
realized.
e. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statements and federal income tax purposes.
Dividends receivable and payable are recorded on ex-dividend dates, except
that certain dividends from foreign securities where the ex-dividend dates
may have passed are recorded as soon as the Corporation is informed of the
dividend. Interest income is recorded on the accrual basis.
f. DISTRIBUTIONS TO STOCKHOLDERS -- The treatment for financial statement
purposes of distributions made during the year from net investment income or
net realized gains may differ from their ultimate treatment for federal
income tax purposes. These differences are caused primarily by differences
in the timing of the recognition of certain components of income, expense
or capital gain, and the recharacterization of foreign exchange gains or
losses to either ordinary income or realized capital gain for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net investment assets based on their
ultimate characterization for federal income tax purposes. Any such
reclassification will have no effect on net assets, results of operations,
or net asset value per share of the Corporation.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
2. AUTOMATIC DIVIDEND INVESTMENT AND CASH PURCHASE PLANS -- Under the
Corporation's Charter, dividends on the Common Stock cannot be declared unless
net assets, after such dividends and dividends on Preferred Stock, equal at
least $100 per share of Preferred Stock outstanding. The Preferred Stock is
subject to redemption at the Corporation's option at any time on 30 days' notice
at $55 per share (or a total of $41,400,700 for the shares outstanding) plus
accrued dividends, and entitled in liquidation to $50 per share plus accrued
dividends.
The Corporation, in connection with its Automatic Dividend Investment and
Cash Purchase Plan and other Stockholder plans, acquires and issues shares of
its own Common Stock, as needed, to satisfy Plan requirements. For the six
months ended June 30, 1997, 994,291 shares were purchased from Plan participants
at a cost of $25,257,327, which represented a weighted average discount of
18.02% from the net asset value of those acquired shares. A total of 869,474
shares were issued to Plan participants during the six months for proceeds of
$22,070,777, a discount of 17.12% from the net asset value of those shares.
At June 30, 1997, 212,065 shares of Common Stock were reserved for issuance
upon exercise of 14,436 Warrants, each of which entitled the holder to purchase
14.69 shares of Common Stock at $1.53 per share. Assuming the exercise of all
Warrants outstanding at June 30, 1997, net investment assets would have
increased by $324,459 and the net asset value of the Common Stock would have
been $33.23 per share. The number of Warrants exercised during the six months
ended June 30, 1997, and the year ended December 31, 1996, was 44 and 929,
respectively.
3. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding USGovernment obligations and short-term investments,
amounted to $829,777,101 and $745,246,245, respectively; purchases of
USGovernment obligations were $124,085,156. At June 30, 1997, the cost of
investments for federal income tax purposes was substantially the same as the
cost for financial reporting purposes, and the tax basis gross unrealized
appreciation and depreciation of portfolio securities, including the effects of
foreign currency translations, amounted to $1,024,842,846 and $22,013,338,
respectively.
4. SHORT-TERM INVESTMENTS -- At June 30, 1997, the Corporation owned short-term
investments which matured in less than seven days.
5. MANAGEMENT FEE,ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the
Corporation and provides or arranges for the necessary personnel and facilities.
Seligman Henderson Co. (the "Subadviser"), an entity owned 50% each by the
Manager and Henderson plc, supervises and directs all or a portion of the
Corporation's foreign investments.For this service, the Subadviser receives a
fee from the Manager, payable monthly. Compensation of all officers of the
Corporation, all directors of the Corporation who are employees or consultants
of the Manager, and all personnel of the Corporation and the Manager is paid by
the Manager or by Henderson plc. The Manager receives a fee, calculated daily
and payable monthly, equal to a percentage of the Corporation's daily net assets
at the close of business on the previous business day. The management fee rate
is calculated on a sliding scale of 0.45% to 0.375%, based on average daily net
assets of all the investment companies managed by the Manager. The management
fee for the six months ended June 30, 1997, was equivalent to an annual rate of
0.41% of the average daily net assets of the Corporation.
Seligman Data Corp., owned by the Corporation and certain associated
investment companies, charged the Corporation at cost $1,680,057 for stockholder
account services. The Corporation's investment in Seligman Data Corp. is
recorded at a cost of $43,681.
Certain officers and directors of the Corporation are officers or directors
of the Manager, the Subadviser, and/or Seligman Data Corp.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
The Corporation has a compensation arrangement under which directors who
receive fees may elect to defer receiving such fees. Interest is accrued on the
deferred balances. The cost of such fees and interest is included in directors'
fees and expenses, and the accumulated balance thereof at June 30, 1997, of
$465,690 is included in other liabilities. Deferred fees and the related accrued
interest are not deductible for federal income tax purposes until such amounts
are paid.
6. RESTRICTED SECURITIES -- At June 30, 1997, the Tri-Continental Financial
Division of the Corporation was comprised of three investments that were
purchased through private offerings and cannot be sold without prior
registration under the Securities Act of 1933 or pursuant to an exemption
therefrom. These investments are valued at fair value as determined in
accordance with procedures approved by the Board of Directors of the
Corporation. The acquisition dates of investments in the limited partnerships,
along with their cost and values at June 30, 1997, are as follows:
<TABLE>
<CAPTION>
INVESTMENTS ACQUISITION DATE(S) COST VALUE
- ------------------------------------ ------------------- ----------- -----------
<S> <C> <C> <C>
Water Street Corporate Recovery
Fund I, L.P. 10/9/90 to 2/28/97 $ 602,677 $ 256,975
WCAS Capital Partners II, L.P. 12/11/90 to 3/5/97 8,382,367 8,316,063
Whitney Subordinated Debt Fund, L.P. 7/12/89 to 6/27/97 7,668,956 8,959,795
----------- -----------
Total $16,654,000 $17,532,833
=========== ===========
</TABLE>
23
<PAGE>
FINANCIAL HIGHLIGHTS
The Corporation's financial highlights are presented below. "Per share
operating performance" data is designed to allow investors to trace the
operating performance, on a per Common share basis, from the beginning net asset
value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, the per share amounts are derived by
converting the actual dollar amounts incurred for each item, as disclosed in the
financial statements, to their equivalent per Common share amounts.
"Total investment return" measures the Corporation's performance assuming
that investors purchased shares of the Corporation at the market value or net
asset value as of the beginning of the period, invested dividends and capital
gains paid, as provided for in the Corporation's Prospectus and Automatic
Dividend Investment and Cash Purchase Plan, and then sold their shares at the
closing market value or net asset value per share on the last day of the period.
The computations do not reflect any sales commissions investors may incur in
purchasing or selling shares of the Corporation. Total investment returns for
periods of less than one year are not annualized.
"Average commission rate paid" represents the average commission paid by the
Corporation to purchase or sell portfolio securities. It is determined by
dividing the total commission dollars paid by the number of shares purchased and
sold during the period for which commissions were paid. This rate is provided
for the period beginning January 1, 1996.
The ratios of expenses to average net assets and net investment income to
average net assets for the periods presented do not reflect the effect of
dividends paid to Preferred Stockholders.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
Six Months
Ended
June 30, 1997 1996 1995 1994 1993 1992
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
NET ASSET VALUE,
BEGINNING OF PERIOD ................... $29.28 $27.58 $23.70 $27.49 $28.03 $28.57
------ ------ ------ ------ ------ ------
Net investment income .................. .29 .68 .74 .83 .83 .81
Net realized and unrealized
investment gain (loss) ................ 4.99 4.84 6.14 (1.69) 1.46 1.19
Net realized and unrealized gain (loss)
on foreign currency transactions ...... (.13) (.02) .03 .02 -- --
----- ----- ----- ----- ----- -----
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS ................. 5.15 5.50 6.91 (.84) 2.29 2.00
Dividends paid on Preferred Stock ...... (.01) (.02) (.02) (.03) (.03) (.03)
Dividends paid on Common Stock ......... (.31) (.66) (.73) (.79) (.80) (.78)
Distribution from net gain realized .... (.81) (2.72) (2.01) (1.90) (1.80) (.70)
Issuance of Common Stock
in gain distributions ................. -- (.40) (.27) (.23) (.19) (.05)
Issuance of Common Stock
upon Warrant exercise ................. -- -- -- -- (.01) --
Issuance of Common Stock
from exercise of Rights ............... -- -- -- -- -- (.97)
Rights offering costs .................. -- -- -- -- -- (.01)
------ ------ ------ ------ ------ ------
NET INCREASE (DECREASE)
IN NET ASSET VALUE .................... 4.02 1.70 3.88 (3.79) (.54) (.54)
------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD ......................... $33.30 $29.28 $27.58 $23.70 $27.49 $28.03
====== ====== ====== ====== ====== ======
ADJUSTED NET ASSET VALUE,
END OF PERIOD* ....................... $33.23 $29.22 $27.52 $23.65 $27.42 $27.95
MARKET VALUE, END OF PERIOD ............ $27.0625 $24.125 $22.625 $19.875 $23.75 $25.50
- -----------------
See footnotes on page 25.
</TABLE>
24
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended -----------------------------------------------------
June 30, 1997 1996 1995 1994 1993 1992
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
TOTAL INVESTMENT RETURN:
Based upon market value 16.83% 21.98% 27.95% (5.07)% 3.47% .61%++
Based upon net asset value 18.44% 21.45% 30.80% (2.20)% 8.95% 7.42%++
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets .62%+ .62% .63% .64% .66% .67%
Net investment income to
average net assets 1.88%+ 2.27% 2.71% 3.08% 2.88% 2.86%
Portfolio turnover rate 25.96% 53.96% 62.28% 70.38% 69.24% 44.35%
Average commission rate paid $.0580 $.0478
NET INVESTMENT ASSETS,
END OF PERIOD (000s omitted):
For Common Stock $3,220,605 $2,835,026 $2,469,149 $1,994,098 $2,166,212 $2,088,102
For Preferred Stock 37,637 37,637 37,637 37,637 37,637 37,637
---------- ---------- ---------- ---------- ---------- ----------
TOTAL NET INVESTMENT ASSETS $3,258,242 $2,872,663 $2,506,786 $2,031,735 $2,203,849 $2,125,739
========== ========== ========== ========== ========== ==========
- --------------------
* Assumes the exercise of outstanding warrants.
+ Annualized.
++ The total investment returns for 1992 have been adjusted for the effect of
the exercise of Rights (equivalent to approximately $0.97 per share),
assuming full subscription by Common Stockholders.
See Notes to Financial Statements.
</TABLE>
25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SECURITY HOLDERS,
Tri-Continental Corporation:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, and the statement of capital stock and surplus of
Tri-Continental Corporation as of June 30, 1997, the related statements of
operations for the six months then ended and of changes in net investment assets
for the six months then ended and the year ended December 31, 1996, and the
financial highlights for the six months then ended and for each of the years in
the five-year period ended December 31, 1996. These financial statements and
financial highlights are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the Corporation's custodians and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Tri-Continental
Corporation as of June 30, 1997, the results of its operations, the changes in
its net investment assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
New York, New York
August 1, 1997
26
<PAGE>
TRI-CONTINENTAL CORPORATION
PROXY RESULTS
Tri-Continental Corporation Stockholders voted on the following proposals at
the Annual Meeting of Stockholders onMay 15, 1997, in Boston, MA. The
description of each proposal and the voting results are stated below.Each
Director was elected, the amendment to the Charter of the Corporation was
approved, and the selection of Deloitte &Touche LLP as auditors was
ratified.None of the Stockholder proposals passed.
For Withheld
--- --------
Election of Directors:
John R. Galvin 73,974,295 3,807,874
William C. Morris 74,285,161 3,497,096
James Q. Riordan 74,247,894 3,534,341
Richard R. Schmaltz 74,105,138 3,677,079
Robert L. Shafer 74,119,246 3,662,977
Brian T. Zino 74,286,839 3,495,600
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Vote
--- ------- ------- --------
<S> <C> <C> <C> <C>
Ratification of Deloitte &
Touche LLP as auditors 75,453,975 829,308 1,498,993 N/A
Amendment to Increase
the Number of Authorized
Shares of CommonStock 69,031,522 7,118,885 1,631,836 N/A
Stockholder proposal relating to:
1) limiting the issuance of
new shares 8,608,333 48,291,169 2,864,876 18,017,897
2) share repurchase program 8,324,793 48,365,737 3,073,848 18,017,897
3) conversion to a mutual fund 9,442,163 48,000,901 2,321,314 18,017,897
4) additional qualification
for potential Directors 11,004,099 45,767,389 2,992,892 18,017,895
5) conversion to an index fund 5,804,860 50,990,841 2,968,678 18,017,896
</TABLE>
27
<PAGE>
TRI-CONTINENTAL CORPORATION
BOARD OF DIRECTORS
FRED E. BROWN
DIRECTOR EMERITUS
DIRECTOR AND CONSULTANT,
J. & W. Seligman & Co.
Incorporated
JOHN R. GALVIN (2,4)
DEAN, Fletcher School of Law and
Diplomacy at Tufts University
DIRECTOR, USLIFE Corporation
ALICE S. ILCHMAN (3,4)
PRESIDENT, Sarah Lawrence College
TRUSTEE, Committee for Economic
Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON (2,4)
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
JOHN E. MEROW
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Aluminum
Corporation
BETSY S. MICHEL (2,4)
DIRECTOR OR TRUSTEE,
Various Organizations
WILLIAM C. MORRIS (1)
CHAIRMAN
CHAIRMAN OF THE BOARD,
J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY (3,4)
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch,
Law Firm
JAMES Q. RIORDAN (3,4)
DIRECTOR, The Brooklyn Union Gas Company
TRUSTEE, Committee for Economic
Development
DIRECTOR, Dow Jones & Co., Inc.
DIRECTOR, Public Broadcasting Service
RICHARD R.SCHMALTZ (1)
MANAGING DIRECTOR, J. & W. Seligman & Co.
Incorporated
TRUSTEE EMERITUS,Colby College
ROBERT L. SHAFER (3,4)
DIRECTOR OR TRUSTEE,
Various Organizations
JAMES N. WHITSON (2,4)
EXECUTIVE VICE PRESIDENT AND DIRECTOR,
Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, Red Man Pipe and Supply Company
BRIAN T. ZINO (1)
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
- --------------------
Member:
(1) Executive Committee
(2) Audit Committee
(3) Director Nominating Committee
(4) Board Operations Committee
28
<PAGE>
TRI-CONTINENTAL CORPORATION
Executive Officers
WILLIAM C. MORRIS
CHAIRMAN
BRIAN T. ZINO
PRESIDENT
CHARLES W. KADLEC
VICE PRESIDENT
CHARLES C. SMITH, JR.
VICE PRESIDENT
LAWRENCE P. VOGEL
VICE PRESIDENT
THOMAS G. ROSE
TREASURER
FRANK J. NASTA
SECRETARY
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
SUBADVISER
Seligman Henderson Co.
100 Park Avenue
New York, NY 10017
STOCKHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) TRI-1092 Stockholder Services
(800) 445-1777 Retirement Plan Services
(800) 622-4597 24-Hour Automated
Telephone Access Service
29
<PAGE>
TRI-CONTINENTAL CORPORATION
MANAGED BY
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
INVESTMENT MANAGERS AND ADVISORS
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
THIS REPORT IS INTENDED ONLY FOR THE INFORMATION OF STOCKHOLDERS OR THOSE WHO
HAVE RECEIVED THE CURRENT PROSPECTUS COVERING SHARES OF COMMON STOCK OF TRI-
CONTINENTAL CORPORATION, WHICH CONTAINS INFORMATION ABOUT MANAGEMENT FEES
AND OTHER COSTS.
CETRI3 6/97